Foreign Competition, Market Power and Wage Inequality: Theory and Evidence / George J. Borjas, Valerie A. Ramey.

Format:

Book

Author/Creator:

Borjas, George J.

Contributor:

National Bureau of Economic Research.

Ramey, Valerie A.

Series:

Working Paper Series (National Bureau of Economic Research) no. w4556.

NBER working paper series no. w4556

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Foreign Competition, Market Power and Wage Inequality

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1993.

Summary:

In this paper, we present theory and evidence on the link between wage inequality and foreign competition in concentrated industries. We develop a simple model in which the impact of foreign competition on the relative wages of an economy depends on the market structure of the industry penetrated. We show that the more concentrated is the industry, the greater is the impact of trade on general wage inequality. We use the theory to argue why import competition in an industry such as automobiles is much more deleterious to the wages of the less educated than import competition in an industry such as apparel. We then test our hypothesis using a panel data set on relative wages across SMSAs. We reinterpret our model as a model of local economies, and test it using both the cross-sectional and time- series variation across labor markets.

Notes:

Print version record

December 1993.